Governor Andrew Cuomo of New York announced last week that his administration is implementing a regulation permanently banning hydraulic fracturing throughout the state due to health concerns. This action effectively ends a temporary moratorium on the practice that has been in place since 2008. New York joins Vermont as the only two states that now ban hydraulic fracturing. The majority of states, as well as the U. S. Environmental Protection Agency, have favored tougher regulations to address any health and safety concerns relating to the practice, finding that an outright ban is unnecessary.

The impact this will have on producing states in the Marcellus and Utica Shale formations is uncertain. Because New York issued a moratorium in 2008, the natural gas boom over the past few years has taken place without New York’s participation. Thus, in many ways, this ban is just a continuation of the status quo. Additionally, given the drop in oil prices worldwide, minimizing domestic competition may be in the best interests of a state like Pennsylvania.

This ban does not end the conversation in New York, however. Several organizations are already moving towards legal action against Governor Cuomo, citing private property rights and other Constitutional protections. The success of these cases is not known at this time, but the U.S. Supreme Court and state courts of New York have consistently upheld private property rights absent a compelling and legitimate government interest. Nevertheless, many natural gas producers that would likely have entered the New York market immediately now must wait even longer and perhaps completely abandon their plans to develop the Empire State. This continued lack of production will undoubtedly have a negative economic effect on landowners in upstate New York.

This ban may also elevate already existing conversations in Ohio and Pennsylvania regarding bans. In both states, several municipalities have banned the practice for various reasons, but conversations at the statewide level have been minimal. The Pennsylvania Supreme Court has already held that municipalities have the right to regulate certain aspects of oil and gas drilling at the local level, but it is not clear if this would prevent a statewide ban. Regardless, while Governor-Elect Tom Wolf has talked about taxing and regulating the oil and gas industry, there has not been a threat of an outright ban. The economic benefits realized in Pennsylvania would seem to politically guard against strong support for an outright ban.

If you would like more information on this subject or desire a more in-depth legal analysis of the impact of this decision regarding your role in the oil and gas industry, please contact the Energy Practice Group in our Pittsburgh office at (412) 261-1600. Learn more about Leech Tishman’s Energy Practice Group here.